Drug prices increase as inflation rate declines

November 20, 2009, 10:54 am

You may want to be extra vigilant buying brand-name prescription drugs these days. Prices for some of the most widely prescribed brands shot up an average 9% this year–the highest rate in over a decade–even as the overall inflation rate actually declined by around 1 percent.

This assessment* comes from Stephen W. Scholdelmeyer, a professor of pharmaceutical economics at the University of Minnesota’s PRIME Institute. The analysis includes drugs such as Nexium for heartburn (up 7.2%), Plavix to prevent blood clots (up 8.2%), Singulair for asthma (up 12.5%), Flomax for enlarged prostate (up 19.7%), and Fosamax and Boniva for osteoporosis (up 6.9% and 18.6%, respectively).

The analysis was done for AARP, which has closely monitored wholesale prices for a group of 219 drugs since 2002. "The pharmaceutical industry should be embarrassed when it sees its own price increases put side-by-side with the general inflation rate," said John Rother, AARP executive Vice President. "Even as the cost of most good and services drops, a person taking just one brand name drug now pays $200 more per year than a year ago."

Rother believes, and we agree, that drug companies may be hiking prices in anticipation of Congress passing health reform legislation. The legislation will put increased pressure on drug companies to reign in their price increases. The study also found that the average prices for a group of 185 widely used generic drugs declined by 8.7 percent in12 months from October 2008 to September 30, 2009, widening the gap even further between brand and generic prices. Generic prices feel 11.2 percent in 2008.

That makes our long-time advice even more relevant: Ask your doctor if a generic drug is available for your condition that will work as well as a brand-name drug. Even if you have good insurance, most generics will save you money since your co-pay will be lower. Plus, choosing a generic will lower your employer’s and insurer’s costs, helping to reduce premium increases.